Changing Your Business Model

BioPharm International speaks with Tarja Mottram, CEO of Action for Results, regarding changing business models and strategies centered around Design for Value concepts, team management and leadership, and cross-functionality. Action for Results is a life-sciences-focused consulting company focused on building process capabilities and the practices needed for innovation. Part 1 of this article appeared in the April 2012 issue and focused on strategies for growing a biopharmaceutical product pipeline.

DESIGN FOR VALUE AND FOR PATIENTS

BioPharm: You are a supporter of a concept called "Design for Value" and making that concept a reality. Can you explain this approach?

Mottram: Design for Value is a growing topic in the life sciences. It's existed in the background for some time, but has been more explicitly called out during the past few years. The concept supports the changing healthcare legislation in the US and around the globe—the idea being that we can demonstrate a clear and definite impact on healthcare outcomes. Companies have to be able to show improved evidence with their products, which places an added burden in the development area to create that evidence early on.

BioPharm: What is meant by "improved evidence of outcomes"?

Mottram: By focusing on healthcare outcomes, we go way beyond the traditional measure of clinical outcomes (efficacy and effectiveness) and include the patient and healthcare system impact. For instance, changes to the patient's healthcare status, quality of life, or cost of care. So not only do you need to show the scientific evidence to back your claims, you need to be able to provide conclusive evidence that your particular product provides "more value for the money" compared with other alternatives.

For me, this is about redefining value. Traditionally, most life-sciences companies have based their product innovation on input from physicians and scientists, looking for a scientific breakthrough measured by clinical outcomes. The development tradeoffs were between the scope of the development program (largely defined by the claims), the cost, and time to market. As long as you knew how to manage those three tradeoffs well, and your clinical evidence was solid, the development effort was considered successful.

That was complex enough. However, the emergent healthcare model requires a much deeper understanding of how to create sustainable healthcare value. The market has redefined itself and, as a result, we must understand and balance multiple stakeholder needs.

First, the patient's needs must be considered. Patients are much more informed today and demand more in planning their own treatment. Their definition of "effective outcome" is measured by things such as increased quality of life, improved functional status, and so forth.

Next, physician environments and access to providers is changing dramatically. As a result, the physician needs to demonstrate not only therapeutic effectiveness and good patient outcomes, but also improved (proven) cost effectiveness. Otherwise, he doesn't get paid.

This point brings us to payers. For the sake of simplification, the industry can divide payers into public and private entities (i.e., government reimbursement versus private insurance companies). These are powerful entities influencing use and access to therapies.

Of course, the reimbursement models are also changing. As government initiatives and public pressure is driving closer collaborations between public and private entities, providers and manufacturers must shift their focus from pure cost savings to cost effectiveness. This is different from a pure cost equation. I think, over time, we will see a closer alignment of value to reimbursement, and things like bundled payments that are tied to longer care cycles.

So the bottom line for a life-sciences company: value is defined by a larger set of healthcare outcome measures, which need to be built into the company's approach to product innovation.